- Jimmy Jean, Vice-President, Chief Economist and Strategist
Marc-Antoine Dumont, Senior Economist • Florence Jean-Jacobs, Principal Economist
Commodity Trends
The Economy Takes a Turn for the Worse
March 27, 2025
Highlights
- Although the full and final scope of the Trump administration’s trade policies has yet to be determined, it now looks like Canada and the US will probably be hit by recession. That means commodity prices could slip in the coming months. While some prices surged after tariffs were announced, the effects of the trade war and tangible market uncertainty will start being felt fairly soon, denting demand for a number of commodities.
- Our year-end target of US$68 per barrel for West Texas Intermediate (WTI) still seems fairly balanced between upside and downside risks. Oil prices slid 5.9% from February to March amid a growing glut in global oil output and mounting concern about demand. In response, three weeks after announcing that it would start ramping up production in April, OPEC+ reversed its decision. It’s worth pointing out that the cartel’s February output exceeded its target by 1.2 million barrels per day, which is partly why prices sagged. Given this overproduction and a lack of clarity about the cartel’s plans, we don’t expect output to really increase for the time being. Natural gas prices jumped 13.4% last month as cold snaps in Europe and North America fuelled heating energy consumption. But milder spring temperatures should soften natural gas prices in the weeks to come.
- After flaring up, aluminum, copper and nickel prices are now expected to cool over the next several months as demand wanes. The situation for aluminum and steel is particularly tough as they may be faced with stacked US tariffs that could raise the total levy on Canadian products to 35% and 50%, respectively. Aside from that, the premium—meaning the amount added to the London Metal Exchange (LME) price—on aluminum purchased in North America has increased from approximately US$500 per ton at the beginning of the year to US$900 per ton at the time of writing. This premium includes tariffs. Many industrial consumers of aluminum have warned they may reduce their purchases. Meanwhile, prices for iron ore didn’t soar like other metals due to abundant supply and uncertainty over Chinese demand.
- Gold prices are expected to continue ticking higher in response to heightened uncertainty and worsening economic conditions. We’re keeping our year-end target at US$3,050 per ounce, but the risks are more to the upside than to the downside. Poor stock market performance, multiple signs of a slowdown in US growth and the disquieting global trend toward rearmament have sent investors flocking toward safe haven assets like gold. Given the above, inflows to gold exchange-traded funds (ETFs) jumped by nearly 100 tons in February. The last time inflows accelerated that much was in March 2022, after the war in Ukraine broke out.
- In March, uncertainty over trade policy pushed lumber prices to a high not seen since 2022. Damage from severe mid-March storms and tornadoes in the American South and Midwest is likely to crank up lumber demand temporarily. But over the medium term, the expected US economic downturn may very well tamp down demand. Uncertainty around tariffs could nevertheless keep North American lumber prices higher than normal.
- Grain markets are more volatile, with the United States, Europe and China making a number of announcements regarding tariffs (in force and upcoming). A record soybean crop in Brazil is putting downward pressure on global prices. As for corn, upside and downside risks seem balanced. Good harvests and reduced export tariffs in Argentina have brought down the price of Argentinian corn, while global demand is supporting corn exports from a number of countries, including the US. The weak Canadian dollar is good for exporters, but Canadian canola producers now have to deal with a 100% Chinese tariff. Fertilizer prices have been rising since the year began, and the trade war could keep pushing global fertilizer prices higher in the months to come.
Scenario Adjustments
- Energy: No change.
- Base metals: Annual averages revised to reflect higher prices.
- Precious metals: No change.
Main Commodities
Commodity Prices
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NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively.
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